Island Bound

Hello

Thinking of selling our UK house that we have rented out for 2 years.
We have only been in Canada 2 years and are now permanent residents so know we will probably get charged Capital gains...

A few questions if we have about 20,000 profit:

Are we entitled to the annual exempt amount in the UK?
Do we just pay capital gains in the UK or do we pay the Canadians aswell?
What kind of cost will it be from the Canadian side I guess to transfer 100,000 pounds which we know will flag up on the system....?

Hope there is someone out there who has done this or is a tax know all....

Thanks in advance...been trawling through UK tax website but found no real answers just confusing maybes...

JonboyE

i) If you lived in the house all the time you owned it before you moved to Canada there will be no UK capital gains tax to pay.

ii) the gain is subject to tax in Canada. If the profit is $20,000, $10,000 is taxable. If it is jointly owned then you will each add $5,000 to your income for the year. How much tax you pay will depend on your other income in the year. c $2,000 each?

iii) If the 20,000 is £ then you need to convert to dollars. See the wiki how to do it.

iv) You have to report the gain whether or not you remit money to Canada so it is not an issue if the transfer of cash flags anything.

Island Bound

We did live in the house before we left then rented it since we left, I thought because we rented it we would pay the capital gains.
Which is true?

Almost Canadian

The exemption applies for 3 years after it ceases to be your primary residence.

Island Bound

Ok so this sounds like good news....so we arrived here dec 2011 so if we sell this summer are we free from capital gains providing we lived in it before we left then rented it for 2 years.
I thought I had read that you had to be away/not resident for 5 years before you would not be taxed??????

Almost Canadian

The received wisdom on here appears to be:

Sell within 3 years - no tax;
Sell after 3 but before 5 years - CGT payable;
Sell after 3 years - no tax.

The first two I completely agree with. The third one makes no sense to me and, as far as I am aware, there is no actual legal authority upon it, although I have seen bulletins that suggest that that is what will happen. If it was my property, I would sell within 3 years just to be safe.

Island Bound

Just checking did the last bit mean sell after 5 ...was it a typing error?

JonboyE

http://webarchive.nationalarchives.g...s_capgains.htm

See Q6

But it is likely to change from 2015

http://www.out-law.com/en/articles/2...s-chancellor-/

Almost Canadian

It was, sorry

Almost Canadian

Thank you.

I appreciate what the advice sheets state but I would like to see the piece of legislation or the case where CGT was deemed to have to apply between years 3 and 5, but not after year 5. From a purely logical point of view, it makes no sense.

I accept that, if CGT was charged, one could print off the advice and use that in argument.

JonboyE

Taxation of Chargeable Gains Act 1992 Part I Section 2 (i) a person is only taxed in the UK on capital gains if they are resident or ordinarily resident in the UK.

It is possible to be reasonably certain about being resident using the Statutory Residence Test. However, you can be non-resident but ordinarily resident and so still be taxed on gains. There is no statutory definition of ordinarily resident AFAIK - it is a question of facts. HMRC seem to take the view that if you are out of the UK for 5 complete tax years you are no longer ordinarily resident.

smivers

But even if it is subject to UK capital gains, do you still get to apply the tax free allowance to that amount? So best to sell in April to maximise the effect?

Currently have been renting my UK house for 3-1/2 years. Starting to think about selling it, though currently it is worth about the same as I paid for it in Jan 2008, so no UK capital gains (still Canada capital gains because it dropped so much in the 2-1/2 years after I bought it...).

Island Bound

Couple of questions - what is Canada capital gains...???
Am I liable to UK and Canadian gains?

Also who takes the money....how do the government know I have sold my property if I no longer complete self assessments etc...and am paying no taxes in UK?
Not trying to dodge it but really who takes it and how is it noticed and done???

JonboyE

Half the gain is added to your taxable income and taxed at your marginal rate. The maximum tax will be 25% of your gain. Usually lower.

Potentially, but you get credit for tax paid in the country with the lowest tax against the tax due in the country with the higher rate.

In both countries you are required to file a tax return if you have a taxable gain.

Novocastrian

Jon, reading this thread I'm not sure if the OP realizes what the CRA will consider a capital gain. Please confirm my understanding that the Gain in question is the increase in value of the house at sale compared to its assessed value on the date the OP became tax resident here.

Not, as I suspect s/he believes, the profit made on the transaction between purchase and sale.